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Arista Records LLC v. Lime Group LLC

IP/Entertainment Case Law Updates May 11, 2011

In damages phase of copyright infringement case against distributors of peer-to-peer file sharing system, court grants plaintiff record companies’ motion to preclude defendants from arguing or offering expert testimony to show that other illegal services would have induced infringement even had defendants not.

In this copyright infringement case, the court granted summary judgment May 11, 2010, in favor of plaintiff record companies on their claims against defendants, distributors of a peer-to-peer file sharing program, for secondary copyright infringement. The court found that defendants had induced multiple users of the LimeWire online file-sharing program to infringe plaintiffs’ copyrights in sound recordings. The litigation is now in the damages phase. Plaintiffs seek statutory damages for approximately 9,715 post-1972 sound recordings and actual damages for approximately 1,490 pre-1972 sound recordings.

Plaintiffs moved to preclude defendants from arguing or offering expert testimony to show that other illegal services would have induced infringement of plaintiffs’ copyrights had Lime Wire had not done so. The courted granted the plaintiffs’ motion.

The court noted that there is a dearth of case law on this precise question and looked to a few older patent cases as “the closest guidance” for the proposition that a court should not allow an infringer to escape liability (or reduce his liability) on the theory that even if he had not infringed, someone else would have done so. Acknowledging that the patent decisions are not binding, the court reasoned that the principle underlying them – “essentially a deterrence principle” – nonetheless applied with equal force in a copyright case. “In copyright, as in patent, an infringer should not be able to escape or reduce his liability based on a theory that, had he not infringed, others would have caused similar losses by purveying infringing works.”

The court acknowledged that the application of the principle in both the patent and the copyright context requires a departure from “reality.” In the patent cases, the patent holders would have faced competition from other infringers, had the defendants not infringed. The lost profits – the measure of damages in patent cases – would have been adjusted to reflect that reality. The courts in patent cases have held, however, that public policy outweighs the value of recognizing the presence of other infringers in the market. In the copyright context, the court held that, regardless of the fact that other infringing services did exist that could have caused losses to plaintiffs, defendants should be accountable for losses traceable to their own infringement.

The court stressed that its order did not entirely preclude the admission of evidence regarding other illegal services for all purposes. Evidence of other illegal services may be admissible to show that a diminution in plaintiffs’ profits over time was only partially attributable to defendants, because others caused some of plaintiffs’ actual losses, as well as to counter plaintiffs’ argument that a large award would likely deter other infringers.

With respect to lost revenue, defendants may introduce the historical fact that other illegal services existed to show that not all illegal downloading took place through LimeWire, but they may not argue that they are not responsible for the actual infringement that did take place through their program because that same infringement could have taken place through another system.

As to deterrence, the court noted that plaintiff record companies were seeking to submit evidence regarding other illegal services to show that a large award in their favor is needed to deter infringing conduct by others, and that defendants were seeking to show that large damage awards against similar infringers in the past have failed to deter infringement of plaintiffs’ copyrights. Because plaintiffs will use evidence of other illegal services to argue in favor of a large damage award, the court ordered that defendants should be permitted to rely on similar evidence to counter plaintiffs’ arguments on the deterrent effect.